EU rules could stop Britain helping some businesses

The United Kingdom could be prevented from offering loans to struggling businesses within its territory of Northern Ireland because of European Union regulations, an anomaly that is sure to drive another wedge between the bloc and its recently departed former member.

The Financial Times reported on Wednesday that businesses in the province may be unable to participate in a new loan initiative that London is set to launch because involvement could breach EU state aid rules. The rules do not apply to the rest of the UK because the nation is no longer a member of the bloc but continues to be relevant in Northern Ireland because of contingencies agreed by London and Brussels in the Northern Ireland protocol portion of the Brexit trade deal.

Angela McGowan, the Northern Ireland director of the Confederation of British Industry, told the paper it would be unfortunate if businesses in the province were excluded from help available elsewhere.

"It's vital that companies across the UK can access the full range of financial assistance on offer," she told the paper.

The Financial Times said UK officials have already warned partner lenders taking part in the Recovery Loan Scheme that Northern Ireland businesses could be "ineligible".

The Recovery Loan Scheme is set to replace a 72 billion pound ($99 billion) range of pandemic-countering government support measures beginning April 6.

The issue is the latest in a series of problems associated with the Northern Ireland protocol, which aims to avoid the establishment of a hard border on the island of Ireland by carrying out customs checks at other locations and by keeping the province within the orbit of EU state aid rules.

Businesses in Northern Ireland have already complained about having to comply with other EU rules, such as providing health certificates for food shipped into the province from elsewhere in the UK.

The Daily Express newspaper said UK officials are now drawing up two sets of rules for the Recovery Loan Scheme in a bid to avoid breaching EU rules that ban loans being offered to companies that are part of a restructuring plan, in severe distress, or have made financial losses of more than half of their subscribed share capital.

Paul Scully, the UK's minister for small business, previously said: "Extending our support will help retail and hospitality chains and the thousands of staff they employ."

Dominic Curran, a property adviser at the British Retail Consortium, told the Daily Express many businesses desperately need such loans to ride out pandemic-related challenges.

"Without this, many businesses would not be able to survive, resulting in shuttered shops and job losses," he said.

The opposition Labour Party recently said the government should only ask companies to start paying back such loans when they return to profitability.

Shadow chancellor Anneliese Dodds said 750,000 businesses and 2 million jobs were "on a knife-edge" after a series of lockdowns.

"Forcing businesses to start making debt repayments before they are back on their feet… could mean going to the wall," she said.